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United States v. Sheba Bracelets Inc.

decided: August 14, 1957.


Author: Pope

Before CLARK, Chief Judge, and SWAN and POPE, Circuit Judges.

POPE, Circuit Judge.

The appellants, Sheba Bracelets, Inc., a New York corporation, and Robert J. Carroll, its treasurer, were convicted upon four counts of an indictment under Title 18, § 1001, U.S.C.*fn1 In these counts the two defendants were charged with knowingly and wilfully making false, fictitious and fraudulent statements and representations in an "End-Use Certificate for Semi-Processed Gold." The false statements were charged to have been made in two certificates of that character on the 14th and 28th of September, 1951. The statements charged to have been false were (a) that the defendant Sheba was regularly engaged in the industry of manufacturing jewelry which required the use of gold; and (b) that certain gold which was sold to Sheba would be used by it in the industry in which it was regularly engaged.*fn2

Sheba held a license issued to it under an executive order made pursuant to Title 12 U.S.C.A. § 95a which authorized it to acquire gold for use in the jewelry manufacturing industry.*fn3 On the dates mentioned in the indictment, Carroll, for the corporation, delivered to a firm of gold refiners these end use certificates for the purpose of procuring the quantities of gold which Sheba was permitted to purchase under its license. The Government's evidence was that contrary to the representations made in the certificates, Sheba was not engaged in the manufacture of jewelry and the gold purchased was not intended to be used for such purpose, and was in fact disposed of otherwise.

One group of errors assigned by appellants relate to the court's denial of motions to suppress evidence alleged to have been obtained by the Government by unlawful means. Most of the other claims of error arise out of the court's refusal to require the prosecution to furnish the defendants certain written reports made at the time by Government Secret Service agents concerning events and activities testified to by them at the trial.

Insofar as it has any substance, the argument relating to the motion to suppress grows out of the circumstance that the Government produced evidence tending to prove that one Frank Brooks, who, according to Sheba's books, purchased its entire output of gold bracelets from March, 1951, on, was non-existent, - that there was no such person. This was a substantial part of the evidence which the Government adduced to show that Sheba manufactured no jewelry and had no customers for bracelets. The argument is that if the evidence which appellants say was illegally secured had been suppressed by the court, the Government could not have relied upon this proof as to the non-existence of Frank Brooks. They say that only through illegally obtained evidence did the prosecution procure the investigative lead or clue as to Frank Brooks; that the knowledge that the sole customer was supposedly one Frank Brooks was "knowledge gained by the Government's own wrong,"*fn4 and hence this proof could not be used at all.

The manner in which the Government procured the evidence on which it relied for conviction was as follows: On July 25, 1951, Treasury agents went to the premises where Sheba purported to be manufacturing jewelry for the purpose of inspecting its books. Such inspection was authorized by the terms of the license.*fn5 Carroll was absent when the agents arrived. They waited for him and when he telephoned they talked to him explaining they were there to inspect the premises and examine the books. He stated he had no objection, but that his employees there present (employees of Carroll Instrument Co., a different concern of his), did not have sufficient knowledge of the books. He then made an appointment to meet the agents later in the day at the United States Assay office. At that time and place he was given a list of the books and records required, and two days later these were sent by Carroll to the agents by messenger. The agents kept them for a week returning them on August 3. Included was the Cash Receipts Book, the same book which was subsequently received in evidence at the trial as Exhibit 18. This was the book which recorded the sales of gold bracelets to Frank Brooks. It was while the agents were waiting for Carroll at the Sheba place of business that they noticed that although there was jewelry manufacturing machinery there it was not set up for use, apparently merely stored there, and covered with dust.

Between April 2 and September 13, 1951, Carroll for Sheba purchased from Kastenhuber & Lehrfeld, New York gold refiners, 15,000 ounces of gold, valued at $534,000. These were acquired in separate purchases of approximately 150 ounces each, and on each occasion an end use certificate executed on behalf of Sheba, was delivered to the refiners. Carroll's procedure, in making these purchases, followed a fixed pattern. He would meet a Louis Fisher at a bank, where Fisher would hand him a sum of cash. He would then get a certified check from the bank and with that pay for the gold. The 150 ounces, usually in three bars, would be wrapped in brown wrapping paper when delivered to Carroll.

In September, 1951, Treasury agent Newbrand began following Carroll after he made these purchases. On seventeen different days during that month Carroll would emerge from Kastenhuber & Lehrfeld carrying the package wrapped in brown paper and would go to a building at 10 West 47th Street in Manhattan in which was located the office of Mr. and Mrs. S. Diamant. (Mrs. Diamant was a cousin of Louis Fisher, who delivered the cash to Carroll.) On each occasion Carroll would emerge from the building five or ten minutes after he had entered, and without the package of gold. On September 28, the last of these seventeen days, Agent Newbrand followed him upstairs in the building and saw him enter the Diamant office. When he came out without the package, Carroll was placed under arrest by the agent. Within a half hour another agent arrived with a search warrant for the Diamant office, but upon search no gold was found there. There was then no warrant for Carroll's arrest, and as we shall hereafter note, defendants made much ado about this arrest without a warrant. A reading of the record gives the impression that the defense was contending that because the arrest was an illegal one, the consequence was not merely that evidence taken as an incident to that arrest would be subject to a motion to suppress, but that its effect was to give the defendants an immunity from prosecution.

At the time of the arrest a felony had been committed and there was reasonable cause for believing that Carroll had committed it (Cf. United States v. Perez, 2 Cir., 242 F.2d 867, 869). The officer had authority to make such arrests.*fn6 While the arrest would appear to have been a lawful one, yet nothing turns upon whether it was or not, for it does not appear what if anything was taken from Carroll at the time of his arrest, and nothing so taken was offered or received in evidence against the defendants. Hence the circumstances of the arrest could not be an occasion for an effort to suppress evidence.

In the afternoon of the day of Carroll's arrest, Newbrand with another Treasury agent went to Sheba's place of business in Brooklyn. They had no warrant to search those premises, which were in the main occupied by Carroll Instrument Co. The foreman of the latter company gave them permission to look around the premises. They made an inventory of the gold manufacturing machinery, which was stored in the rear of the place, and they took with them three sales invoice tablets, several Post Office Department return receipt cards, several cancelled checks, and a sheet listing names of Brazilian companies.

Appellants undertake to characterize this occurrence as an illegal search and seizure, and say that knowledge of Frank Brooks "came from the books and records illegally seized on September 28, 1951, the date of the arrest of the defendant Carroll." There is no proof to support that assertion, and the fair inferences from the record are all to the contrary. It nowhere appears that on that occasion either of the agents examined the books, or more particularly, the Cash Receipts Book, where the Frank Brooks name appeared.*fn7 So far as that book was concerned, there is no showing that there was any search of it on that occasion, nor of any other record referring to Frank Brooks, and definitely there was no seizure of it, for it remained in defendants' possession. As for the tablets, the return receipt cards, the checks and the list of Brazilian companies they did take, none of them were offered in evidence.

The Cash Receipts Book, with its entries re Frank Brooks remained in Sheba's possession until April, 1954. At that time a revenue agent of the Internal Revenue Service was making an income tax examination of Sheba for the years 1948 through 1951, and Carroll was requested to furnish Sheba's records for the agent's use in connection with that examination. Carroll complied, and delivered the books and records, including the Cash Receipts Book, to the office of the District Director at Brooklyn. Carroll's affidavit in support of his motion to suppress these books as evidence stated that the Internal Revenue agent had promised to return the books within a short time.

The books were not returned, and in May, 1956, the examining agents turned them over to the United States Attorney at his request. It was thus that the prosecution gained access to the books and had them available for introduction at the ...

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